Fintech is hiding in plain sight, behind every online transaction, credit check and tap of your credit card. What fintech covers and what it can do is growing daily with instances of use across just about every industry, geographical market and business model imaginable.
If you have used any of these tools, you’ve used fintech:
- Paycheck photo upload
- Banking apps
- Tap and pay
A quick glance at this very short list of fintech applications lets you see just how much momentum and money is behind this technology, and this is just the beginning.
When it comes to fintech, Australians are early adopters. On a personal, business and government level there is evidence of a vibrant fintech culture, with over 800 fintech firms, in one of the world’s most sophisticated financial technology countries.
The recent covid pandemic has had an influence too. The Global Fintech Rankings report showed a surge in demand for technology and digital finance in 2020, leading to a year of fintech global expansion. That surge saw Australia climb to number six overall globally for fintech uptake, ranking second in the Asia Pacific economy, behind Singapore.
Top ten global fintech ranking 2021:
|Global fintech ranking||Country (region)|
|1||USA (North America)|
|3||Israel (Middle East & Africa)|
|4||Singapore (Asia Pacific)|
|6||Australia (Asia Pacific)|
|8||The Netherlands (Europe)|
Australian Fintech (July 2021) estimates that the fintech industry has grown from $250 million (AUD) in 2015 to a $4 billion industry in 2021 with Australia fast on the climb up the fintech ladder.
This is great news. Fintech is changing the finance industry and impacting the way consumers track, control and access their finances, providing a faster and more efficient service and making financial management more convenient
Fintech affects our payments, online security and flexibility to pay as we go and receive payments wherever we are.
Fintech started revolutionising the financial sector decades ago with signature recognition and ATMs, but the rapid development and innovation of technology have it expanding in ever wider circles and gaining its own momentum.
Fintech offers you more choices as a consumer. As the technology grows and new services offerings emerge, you get the opportunity to cut out the expensive and time-consuming middle man, especially in digital banking, with more choice for how you manage your money as well as faster and cheaper remittance transfers.
What is financial technology (or fintech)?
Fintech is an amalgamation of the word Financial Technology. It involves any technology used to make (or shake up) the financial services industry. Fintech aims to assist business owners, companies and consumers in streamlining, digitising and augmenting financial operations and processes as well as helping to revolutionise our day to day living.
The reason you don’t know much about it is because 90% of the time, fintech is working behind the scenes. It’s the software, algorithms and applications making apps run smoothly, providing intelligent intel on stocks and approving credit ratings in seconds on both computers and mobile devices.
To make these systems work, fintech is developed by startup companies, thousands of them, which then sell their innovation to firms and the big brands we know and trust. As of November 2021, there were 6,268 fintech startups in the Asia Pacific region with explosive uptakes in Australia.
Some examples of fintech in Australia include:
- Neobanks – Also called digital banks, these banks operate exclusively online, without a physical address. Using sophisticated software you can get spending insights and analysis, multi-currency support, access to smart savings and even, cashback. There are a number of digital banks launching accounts and products in Australia notably Novigi, Up Bank and Revolut.
- Digital wallets – Contactless payments are taking off in Australia with tap and go available just about everywhere for phones, wearables and credit cards. Apple Pay and Google Pay are largely responsible for making this possible.
- Robo advice – Robo advice are intelligent automated investment platforms that help you manage an investment portfolio of exchange traded funds (ETFs), even if you don’t have any previous trading experience.
Originally developed to create greater lending possibilities between businesses and peers and challenge the banks after the 2008 global financial crisis, fintech now has the big banks on side as some of its best customers. With the rise of smartphones, digital banking and app culture, fintech has now shifted to an online focus, driven by consumers’ increased use and the ever-increasing popularity of mobile banking.
While most Australians have a budget app or two on their phone, there are other applications of fintech across a wider network. Examples of fintech users and applications include;
Individuals use fintech for:
- Personal banking
- Tax calculations
- Market and share trades
Banks use fintech for:
- Back-end processes
- Behind-the-scenes monitoring
- Customer apps
- Credit checks and approvals
Businesses use fintech for:
- Payments processing
- E-commerce transactions
- Contactless payments
- Business to Client (B2C) applications
- Business to Business (B2B) loans
B2C applications make up a big part of the current business sector and include multiple platforms like Paypal, Venmo, AfterPay and Apple Pay for lending and payment services.
5 benefits of utilising fintech for your investments and wealth management
While the benefits are just about endless, there are five we really feel are the big winners when it comes to defining the benefits of using fintech for investment and wealth management:
1. You can easily compare and analyse the best options
The advancement of technology opens the door to new business operations, brands and offerings, including nontraditional financial services providers, such as digital banks. This gives consumers more choice and allows for better competition and a bigger range of services and packages. Business owners and companies too can select from a greater range of services to meet their customer needs and deliver packages that align with customer lifestyles.
Even though the range available is bigger, selecting the right one also gets easier. New digital applications, websites and research can help you compare prices, empowering you to make more informed financial choices.
The easy access to fintech options (as well as information about them) can prevent you from making poor spending choices while allowing you to find the most efficient platform for you.
2. You can automate your finances
To save effectively, it needs to be simple and pain-free. By automating your finances with fintech you can put money aside without you having to think about it.
As well as apps that allow you to allocate money to different accounts and monitor your spending, you can also automatically allocate a portion of your pay to be moved straight to savings as soon as it hits your account, so you don’t get a chance to spend it.
Some fintech automating solutions include incorporating mobile apps like Qapital with IFTTT (If This, Then That) recipes to define a chain of events to motivate and keep you on track to your savings goals, e.g. If my weekly grocery shop is under $300, transfer $20 to savings.
Chime is a great example of how fintech is changing the face of finance. The mobile-only bank has no monthly fees and allows users to save money every time they use their Chime debit card by rounding the purchase up to the nearest dollar. The difference goes into savings and can incur hundreds, even thousands of dollars in savings by just adding a few cents to every spend.
The automation capabilities of fintech can increase the ease and convenience of using investment services, so that you’re on track with your finances without having to consult with the bank or buy time from money-saving experts.
3. Investing is an easy and affordable process
If you have an interest in investments and shares but have no market experience, not to worry. Fintech has made investing inexpensive and straightforward, allowing anyone to dabble in stocks and shares without prior investing experience.
An example of fintech in investment intelligence is Robo Advisor. These are computerised investment management tools with low fees and simple setups for customized investment strategies, tailored to your financial situation and goals. Once set up, the computer creates and manages your investment portfolio with minimal human interaction. These types of services are costly to do by hand because the algorithms are tedious, however, the Robo Advisor automation makes once time-consuming processes quick and at no cost.
4. New technologies ensure you have a better customer experience
People used to buy on price. Now customer experience is high on the selection criteria. Businesses are pushing to deliver the best experience and anticipate their customer’s needs and desires. Fintech helps by running background checks, a bit like a digital private eye. As well as being useful for lightning-fast credit score checks and approvals, algorithms can also segment customer groups to deliver target messages to the ones who are more likely to respond, based on demographics, income, employment and online behaviour.
As well as delivering what customers want, customer experience technology is also changing customer expectations, pushing the limits in an ever-upward spiral of possibility.
As well as background data mining, fintech provides better customer experiences through fraud detection, helping to prevent online hacks and scams and deliver solid online security. This is especially important in the digital banking sector, where technology not only locks unauthorised people out, it also provides 24/7 access to genuine customers to retrieve self-service guides and tools, which can help manage your finances in a more personalised and efficient way.
5. Fintech drives financial inclusion
Giving everyone access to banking is a big undertaking but it’s possible with fintech. Not everyone has had access to traditional banks, but technology makes it possible to bring genuine financial inclusion to the global setting.
Regardless of age, gender, race, physical location or mental ability, fintech applications offer affordable and accessible banking services to everyone, allowing every person to have control over their finances, choices for how to manage their funds and a better understanding of their financial standing.
Countries where a large number of citizens have previously been left in the dark around their finances have shown a big response in fintech uptake including China, Kenya and Indonesia who were the highest growth countries in 2019.
Fintech innovation is helping to lower transaction and banking service costs, especially around money transfers, currency exchange and simply day-to-day money handling. They target families and small to mid-sized businesses who otherwise couldn’t afford access to financial services.
It might be time to call fintech out of the shadows and acknowledge just how big its role is in everyday life, especially because consumers are part of the reason these technologies exist.
Consumers are driving the decisions that bring fintech to life. By selecting the providers that offer the quick payments and apps produced by the fintech industry, you are telling the financial sectors that you want a strong user experience and you expect benefits (like instant decision making, pay on the spot, instalments and lower to zero fees) in the movement towards becoming a cashless nation.